New research report: Gas can play a major role in UK energy mix

When looking out to 2050 there is huge uncertainty surrounding how gas will be consumed, transported and sourced in Great Britain (GB). The extent of the climate change challenge is now widely accepted, and the UK Government has introduced a legislative requirement for aggressive reductions in carbon dioxide (CO2) emissions out to 2050. In addition, at European Union (EU) level a package of measures has been implemented to reduce greenhouse gas emissions, improve energy efficiency and significantly increase the share of energy produced from renewable sources by 2020. These policy developments naturally raise the question of what role gas has to play in the future energy mix.

To help inform this debate, the Energy Networks Association Gas Futures Group (ENA GFG) commissioned Redpoint and Trilemma to undertake a long-range scenario-based modelling study of the future utilisation of gas out to 2050, and the consequential impacts of this for gas networks. Our modelling assumptions draw heavily on the Department of Energy and Climate Change (DECC) 2050 Pathways analysis, and we consider that our conclusions are fully compatible with both DECC‟s work and current EU policy objectives.

Key messages
The key findings from our modelling are as follows: There are credible and robust scenarios in which gas could play a major ongoing role in the GB energy mix while meeting both the 2050 carbon targets and the 2020 renewable energy targets. Managing CO2 emissions under these scenarios would require the successful development and roll-out of Carbon Capture and Storage (CCS) technology, supported by the deployment of biomethane injection into the gas distribution network, roll-out of district heating, and / or the usage of combined electricity and gas „dual fuel‟ systems for domestic heating.

 Pathways with ongoing gas use could offer a cost-effective solution for a low-carbon transition relative to scenarios with higher levels of electrification. Our baseline assumptions indicate potential savings of almost £700bn over the 2010 to 2050 period on a Net Present Value (NPV) basis – around £20,000 per household or £10,000 per person – with consequential benefits for consumers, the economy, and the competitiveness of GB industry.

Sensitivity analysis indicates that cost savings are still present under assumptions of higher commodity price trajectories and faster technology learning rates, although the difference in costs is reduced relative to the baseline. All potential pathways to a low-carbon future will involve significant investment in new technology, with its associated risks1. Given the level of uncertainty regarding these issues, there appears to be significant value in retaining the option for a ‘high gas’ future. The costs of maintaining the existing gas transmission and distribution networks are relatively small in comparison to the other system costs associated with a low-carbon transition. Together these findings suggest a compelling economic rationale for maintaining the operation of the GB gas transmission and distribution networks for the foreseeable future.

To read the full report, click here.